Automated market maker exchange Bancor has rolled out a new mechanism that allows users to increase their capital efficiency while providing liquidity in its pools.
Called Vortex, the solution allows users providing liquidity in BNT, Bancor’s utility token, to borrow funds while continuing to obtain yield from swap fees.
The Vortex mechanism reworks the existing mechanism of vBNT, a special version of the BNT token that entitles users to participate in governance. The voting token is automatically received when staking BNT into a liquidity pool, and it can be defined as Bancor’s pool token.
The Vortex proposal adds functionality to vBNT, creating an infrastructure that allows users to sell the token for the original BNT. Once vBNT is converted, users can exchange it into any other asset.
The vBNT sale mechanism makes Vortex a no-liquidation lending platform, letting liquidity providers receive their future rewards immediately, in a similar manner to Alchemix. Since their principal continues to accrue swap fees, the loan will eventually repay itself.
The “no-liquidation” part of the loan comes from the fact that vBNT and BNT are essentially the same token, and the rise in price of the BNT collateral is very likely to be mirrored by vBNT. BNT staking creates vBNT at a one-to-one ratio, but the price relationship between the two is not straightforward.
Combining protocol revenue and lending results in complex tokenomics
The vBNT token’s price is derived from a BNT/vBNT AMM pool, thus largely being defined by the market. A potential arbitrage mechanism means that vBNT is unlikely to ever be worth more than 1 BNT, as arbitrageurs could simply stake BNT, sell the vBNT, and obtain more BNT than they started with. The cycle could be repeated an infinite number of times until the vBNT price returns below 1 BNT.
At the same time, vBNT has no price floor because the arbitrage mechanism cannot work in reverse. As Mark Richardson, the creator of Vortex, explained to Cointelegraph, Bancor uses internal records to define ownership within an AMM pool. This is a significant difference from models like Uniswap’s pool tokens, which are the sole marker of liquidity ownership. The vBNT could be used to redeem a BNT liquidity pool only if that address had already created one.
To guarantee that vBNT maintains some value in the absence of a redemption mechanism, the protocol will be conducting a buyback-and-burn strategy on the token. A governance-defined portion of the protocol’s fee revenue will be diverted to periodically buy and destroy vBNT from the pool with BNT, providing a constant buying pressure.
This has the added result of creating a sink of BNT and vBNT. Since one vBNT unlocks one BNT, destroying vBNT supply creates an imbalance with the tokens contained in AMM pools. A portion of those tokens would thus remain locked in the pools forever, though this should not impact liquidity withdrawal for individual liquidity providers due to the large excess capacity — a similar mechanic occurs with cold wallets on centralized exchanges.
The vBNT token mechanics have a number of interesting ramifications. In addition to the ability to borrow while continuing to receive yield, liquidity providers are also able to leverage their liquidity to receive more swap fees. The price of vBNT directly affects how leveraged the system can be, as prices close to 1 BNT could support an almost infinite leverage factor. At the same time, as more LPs enter leveraged positions, the price of vBNT is likely to decrease and limit the leverage multiplier. An infinite leverage situation would extract value from the protocol, but Richardson is confident that the market-based pricing mechanism quickly makes this costly and ultimately impractical.
Liquidity is no longer an issue, but volume is trailing behind
The Bancor protocol has deployed every resource it has to draw liquidity into the protocol. Between the innovations of single-sided liquidity provision and impermanent loss insurance, introduced with V2.1, it has also launched aggressive liquidity mining programs. The Vortex proposal is yet another tool that could draw liquidity in by introducing leverage on AMM pools.
Bancor’s liquidity campaign has been a demonstrable success. With $1.8 billion in total value locked, it broke into the “billion-dollar TVL club” to become the eighth in the decentralized exchange rankings on DeFi Llama. While it is behind most of its direct competitors such as Uniswap or SushiSwap, Bancor has grown much faster as it started the year at just $140 million in TVL.
The growth in liquidity hasn’t automatically resulted in more volume, however. Though Bancor is in the top-five by volume on Ethereum at $430 million per week, Uniswap dominates the market and attracts almost 17 times as much volume despite only having slightly more than twice the TVL. In Richardson’s view, the Bancor team may have had misguided expectations in its pursuit of liquidity:
“There was this assumption, I would say — and we might not have even been aware that it was an assumption — that if the TVL gets high enough, it will just attract traders […] And if everyone’s using aggregators, then that’s really good for us because we just have to offer the best product at the lowest rates and traders will just use us.”
The reality turned out to be less idealistic than expected as the team found out. “It turns out no one uses aggregators, and traders hardly ever are using the pools with the best rates,” Richardson added. “They just do whatever they’re going to do.” Nate Hindman, head of growth at Bancor, had his own view of why Uniswap is so dominant:
“I think a big part of that has been this sort of ‘Uniswap gems’ movement that was a DeFi summer thing, where there’s all these new tokens that are launching pools on Uniswap. So, Uniswap is the only place to get these ‘gems.’”
Hindman’s assessment seems to be in line with Uniswap’s volume data. According to its statistics, the volume distribution is heavily skewed toward smaller tokens. Pairs between Ether (ETH), Bitcoin (BTC) and stablecoins take about 25% of the total volume, while the rest of the list is populated largely by low-capitalization tokens that are hard to access on other platforms.
As Hindman revealed, capturing the “long tail of tokens” will be Bancor’s next major objective. One potential proposal for that is the Origin Pool, which allows creating “synthetic” pools paired with ETH, whic is seamlessly replaced with BNT by the protocol. This would solve long-standing onboarding friction for Bancor, as projects wishing to get listed needed to hold BNT in addition to their own token.
After the Uniswap V3 announcement and its heavy focus on swap efficiency — partially at the expense of liquidity pool automation — it became clear that AMM projects are starting to diversify into different niches. With SushiSwap’s focus on additional features such as margin trading, Balancer’s push for composability, and Bancor’s approach focusing on the LP and the BNT token, the AMM space is becoming more and more varied.
ShapeShift Launches Decentralized Trading Through THORChain, RUNE at ATH
In an announcement on April 13, the Switzerland-based non-custodial crypto company stated that it was now fully integrated with THORChain, enabling users to trade native Bitcoin with Litecoin and Ethereum for the first time.
The move is a big deal because it is the first time a decentralized exchange has enabled crypto asset swaps across different blockchains without the need for bridging technology or custodian controlled wrapped tokens.
Launch all the things! 🚀 🚀 🚀 pic.twitter.com/lgkUxl2QJ6
— ShapeShift 🦊 (@ShapeShift_io) April 13, 2021
THORchain Crossing the Chains
THORchain launched its long-awaited MCCN, ‘multi-chain chaos net’ platform on Tuesday, April 13 amid a great deal of hype from the crypto community including ShapeShift CEO Erik Voorhees.
Less than a day before the launch, Voorhees stated that it would be a huge deal for crypto.
“Native cross-chain decentralized exchange. Never been done before. Arguably the biggest event in crypto this week, though it may not be obvious for a year or two.”
THORchain uses its own native token RUNE as collateral and an intermediary, so those wanting to trade BTC for ETH, for example, will have the trade go via RUNE yet the end-user will not notice.
The revolutionary platform has been in development for three years and yesterday’s launch could bring big improvements to the rapidly evolving DEX space.
Voorhees continued to extol its virtues:
“We saw the power of this technology and wanted to bring it to our users immediately. This is a continuation of our commitment to offer users an easy, self-custody platform for their decentralized trading needs.”
ShapeShift DEX users, including those making trades via the new THORChain integration, can also earn FOX Tokens with every trade which enables eligibility for other rewards on the platform.
FOX Pumps 45%, RUNE Hits ATH
ShapeShift’s FOX token exploded on the news, pumping 45% to reach an intraday high of $1.30. The exchange-based token has made 180% over the past month and hit an all-time high of $1.60 on April 6.
THORchain’s RUNE token has also been on fire, surging 19% on the day to hit an all-time high of $14.60 at the time of writing according to Coingecko.
RUNE has doubled in price over the past fortnight and pumped a monumental 1,150% since the beginning of the year.
AAX Exchange reveals: HKD, SDG, and GBP Top FIAT currencies deposited in April
[Press Release – Singapore, April 13, 2021 ]
After the 2021 easter holiday, AAX recorded the highest amount of fiat deposits into the exchange with a total over 10 million USD in 10 days. The top three currencies are Hong Kong Dollar, Singapore Dollar and Great Britain Pound.
AAX supports three methods for depositing fiat, including peer-to-peer trading, fiat gateways supported by fiat gateway partners, and direct bank transfer powered by First Digital Trust, the digital custody arm of Hong Kong-licensed and publicly registered trust company, Legacy Trust.
“For many years, the on and off-ramps between crypto and fiat have acted as a bottleneck,” said AAX’s CEO, Thor Chan. “Now that the infrastructure is in place, we’re seeing more and more individuals transition into Bitcoin for its disinflationary qualities or seek exposure to altcoins for portfolio diversification.”
“While our peer-to-peer and Fast Buy platforms are effective in serving most retail traders, with First Digital Trust we’re also able to serve high net worth investors as well as traders that are looking for cross-currency arbitrage opportunities.”
AAX, a member of the London Stock Exchange Group’s institutional partner platform, gives its investors the same tools and market infrastructure as what institutional investors generally expect to see on traditional exchanges.
Investors of all levels will find that AAX’s platform caters to their every need. Its newly created fiat deposit services provided through First Digital Trust adds an extra layer of trust to ease any concerns new investors in crypto might have when entering the crypto space.
AAX is a deep-liquidity and deeply trusted cryptocurrency exchange that is favored by more than half a million users. Powered by London Stock Exchange’s LSEG Technology, AAX offers crypto futures contracts, 50+ spot pairs, P2P fiat trading, savings products and top-grade API connectivity. AAX enables users to buy bitcoin easily via its OTC or Fast Buy platforms and supports over 20 fiat currencies.
Stellar-based gaming and collectibles platform Litemint to integrate DigitalBits
Non-fungible tokens or NFTs have stolen headlines the world over, plastered across both crypto and mainstream media. And, it’s no surprise. Beeple’s “Everyday’s – The First 5000 Days” sold at Christie’s for an astounding $69,346,250, asserting Beeple as one of the top three most valuable living artists. This sale established two historical landmarks: the first sale of a wholly digital piece of art with a unique NFT, and the acceptance of cryptocurrency (ETH) as the form of payment.
Paris Hilton recently released a comprehensive article on NFTs and their potential to empower creators. She also hinted at releasing her own. And this is only the tip of the iceberg, with musicians such as 3LAU and the King of Leons, as well as sports superstars like Tom Brady and Rob Gronkowski getting in on the action.
The DigitalBits Project, first launched in 2017 with an initial focus on consumer digital assets, has since expanded to include branded stablecoins as well as the rapidly growing world of esports and gaming. The XDB Foundation, the primary contributor to the DigitalBits Project, is now looking to enter the NFT space, having recently sealed a partnership with leading NFT and Collectibles Marketplace, Litemint, a technology company specializing in the creation of unique experiences for crypto enthusiasts, collectors, and gamers.
The introduction of NFT functionality to the DigitalBits blockchain introduces a wholly new vertical to the platform. As scalability issues continue to plague Ethereum, DigitalBits provides a welcome alternative to creators and users alike, allowing for significantly reduced gas fees and wait times.
Built on Stellar since its inception in 2018, Litemint recently unveiled its NFT and Collectibles marketplace, expanding beyond its initial gaming value proposition. Litemint brings NFTs and digital collectibles to the online gaming experience, introducing unique elements such as true asset ownership and seamless transfer and tradeability not available within today’s leading online gaming environments.
DigitalBits’ origins as a Stellar fork make it highly compatible with Litemint’s existing technology and allows for the activation of a number of potential synergies between the XDB Foundation and Litemint.
“With its unique closeness to the mainstream, gaming industry and core compatibility with the Stellar technology, DigitalBits is a perfect match for our NFT and collectibles platform,” stated Frederic Rezeau, Founder and CEO of Litemint. “I am confident that together, provided our ability to execute on the open-source Stellar technology, we can leverage exceptional business opportunities with a seamless integration of DigitalBits and their consumer-oriented market.”
Other organizations are also looking to DigitalBits as an alternative for their NFT initiatives. The network is highly scalable, capable of processing upwards of 10 000 transactions per second, with transaction fees as low as 0.00001 XDB (less than a penny at today’s prices), and confirmation times ranging between 2-5 seconds. Although Ethereum is the current market leader for NFTs, the network’s inability to scale has resulted in exorbitant fees when minting and transferring NFTs, creating a huge barrier to entry. The integration of the DigitalBits network with platforms such as Litemint now provides an agile, low-cost alternative for creators and users, streamlining the issuance, transfer, and trade of NFTs.
“I’m very excited to see the upcoming integration of the DigitalBits network into Litemint’s NFT and collectibles marketplace,” said Michael Gord, Managing Director of the XDB Foundation. “NFTs have the ability to add an entirely new layer to the user experience, allowing for unique activations that can be implemented across numerous different industries. I look forward to seeing the ongoing innovation that continues to emerge from this new asset class as more and more people begin to use NFTs.”
Litemint acquired Stellarport, a leading decentralized exchange, and service platform within the Stellar ecosystem, in January 2020, citing the massive opportunity created by bringing together crypto users and gamers, bringing unmatched dynamism to both platforms. The DigitalBits Project is an open-source protocol layer blockchain specializing in consumer digital assets, the development of which is led by the XDB Foundation. The XDB Foundation is a non-profit organization focused on driving growth and adoption of the DigitalBits blockchain and ecosystem.
Disclaimer: This is a paid post and should not be treated as news/advice
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